TL;DR:
- Kalshi will implement technical barriers to prevent athletes, coaches, and politicians from trading in markets linked to their own activities.
- Two U.S. senators introduced the bipartisan “Prediction Markets Are Gambling Act,” which could eliminate sports contracts from these platforms.
- Arizona’s attorney general filed criminal charges against Kalshi last week for operating without a sports betting license.
The prediction markets platform Kalshi announced the implementation of technical mechanisms to preventively block professional and collegiate athletes, coaches, referees, and political candidates from trading in markets related to their own activities.
Until now, the company had rules prohibiting that type of trading, but lacked tools to technically prevent it from being executed. The new system will install direct barriers before any irregular transaction can take place.
Robert DeNault, Kalshi’s chief compliance officer, explained to Axios that the preventive approach gives the platform greater chances of detecting bad actors in advance. For the athlete verification process during registration, the company partnered with Integrity Compliance 360 (IC360), an external contractor specializing in sports integrity.
On the same day, its main competitor, Polymarket, also announced new rules that prohibit trading on insider information and block any user with the direct ability to influence the outcome of an event.
Kalshi and Polymarket Face Mounting Regulatory Pressure
A legislative initiative was announced that could directly impact prediction markets. Senators Adam Schiff and John Curtis introduced the bipartisan Prediction Markets Are Gambling Act, which would prohibit CFTC-regulated exchanges from offering contracts tied to sports or games of chance. Curtis noted that too many young people in Utah are being exposed to addictive sports betting through contracts that, in his view, should fall under state rather than federal regulation.
The regulatory landscape has been escalating for months. Kalshi faces criminal charges filed by the attorney general of Arizona, who accused the company of operating a sports betting operation without a license. Tennessee had already issued cease-and-desist orders against prediction markets earlier this year.
CFTC Chairman Michael Selig, appointed by the Trump administration, signaled that he will defend federal jurisdiction against state-level challenges. The federal regulator’s stance is also relevant because Donald Trump Jr. holds investments in Polymarket and serves as a strategic advisor to Kalshi.
Analyst Dustin Gouker summed up the situation precisely: insider trading is the problem that could entirely destroy the business model of prediction markets. The new technical measures are a response to that threat, but the legislative and judicial battle has only just begun.
